Consumer Behavior

Midterm prep

What is the "Two choices" chocolate experiment (Lindor vs. Hershey's Kiss)?

When Lindor cost 26 cents and a Hershey's Kiss cost 1 cent, 40% chose the Kiss. When both prices dropped by 1 cent (Lindor 25 cents, Kiss free), 90% chose the Kiss. The relative price difference stayed the same, but "free" changed behavior dramatically.

What is "the power of Free"?

FREE captures consumers' attention in a powerful way. Consumers overreact to zero prices beyond what a rational cost-benefit analysis predicts (e.g., Londoners queuing across the capital for free Subway sandwiches).

Is free always good?

No. "Free" can lead to poor decisions, e.g., adding extra items to an Amazon cart just to qualify for free shipping (spending more to save less), or choosing something low-quality/risky because it is free (the free-tattoo example).

What is the pen vs. suit shopping example, and what does it show?

Pen: 25€ here, 18€ at a store 15 minutes away. Suit: 455€ here, 448€ at a store 15 minutes away. Both save exactly 7€ for the same 15-minute trip, but most people would travel for the pen and not for the suit. Consumers evaluate savings relatively (as a percentage of price), not in absolute terms, which is not rational.

What are the three aims of the Consumer Behavior course?

1) Understand the key frameworks, concepts and theories of consumer behavior. 2) Analyze consumers from a psychological perspective. 3) Understand how effective marketing strategies can be designed. Overall: effective analysis as a basis for MANAGERIAL DECISION MAKING.

What is the definition of consumer behavior?

1) Consumer ACTIVITIES associated with the purchase, use and disposal of goods and services. 2) Consumers' emotional, mental and behavioral RESPONSES to marketing activities.

What are the three consumer activities in the CB model?

Purchase, use/consume, and dispose.

What are the three types of consumer responses in the CB model?

Emotional, mental (cognitive), and behavioral.

How do consumer activities and consumer responses relate in the CB diagram?

Both make up consumer behavior, and they influence each other (two-way arrow between activities and responses).

What are examples of disposal activities?

Throwing away (landfills), recycling, reselling (e.g., Vinted), and reorganizing/decluttering (e.g., Marie Kondo's KonMari method, "Tidying Up" on Netflix).

What is the difference between individual and organizational consumers?

Individual consumers buy goods and services to satisfy their own needs and wants, or the needs and wants of others. Organizational consumers buy to produce other goods or services, resell them, or help manage their organizations. This course focuses on individual consumers.

According to the "Consumer behavior reflects…" framework, what are the five elements of consumer behavior?

The totality of decisions (whether, what, why, how, when, where, how much/how often/how long), about the consumption (acquisition, usage, disposition), of an offering (products, services, activities, ideas), by decision-making units (information gatherer, influencer, decider, purchaser, user), over time (hours, days, weeks, months, years). These feed into and are shaped by marketing strategies and tactics.

What are the five roles in a decision-making unit?

Information gatherer, influencer, decider, purchaser, and user. One person or several people can hold these roles.

What types of offerings can consumer behavior be about?

Products, services, activities, and ideas.

What are the three consumption stages in the "totality of decisions" framework?

Acquisition, usage, and disposition.

Why do we study consumer behavior?

It is a good lens for studying human behavior ("consumer behavior is human behavior"). It helps us understand and control our own behavior, influence consumers, improve business performance, anticipate and satisfy needs (product innovation), and help consumers make better decisions (e.g., as policy makers).

What marketing failures illustrate why companies need to understand consumers?

IKEA's "FARTFULL" work bench (name with an unintended meaning in English). Kim Kardashian's "Kimono" shapewear, criticized for cultural appropriation and renamed. Gap's logo change on October 6, 2010, reversed to the old logo on October 12, 2010 after consumer backlash.

What policy examples show consumer behavior applied to helping consumers decide?

Graphic cigarette warnings ("Smoking causes blindness"), traffic-light nutrition labels (Food Standards Agency: low/med/high in green/amber/red), and public health campaigns like "Your hands can be dangerous" handwashing posters.

What is the summary of Session 1?

Consumers are not necessarily rational, but theories can predict or explain their perception, decisions, actions and evaluations. CB studies the emotions, thoughts and actions related to the purchase, use and disposal of goods and services. Marketing and policy are influenced by what we know about consumer behavior.

What is "the theory of the case" from Session 3?

Consumer behavior can occur under three conditions: 1) low involvement, 2) high involvement & utilitarian, 3) high involvement & ego-expressive/hedonic. These conditions affect how consumers approach purchase decisions, how they conceptualize usage relationships, and the key strategic issues for marketers.

What are the seven dimensions used to analyze the three motivational contexts?

1) Sequence (order of knowing, feeling, doing). 2) Trigger (what started the decision). 3) Problem solving (extensive, limited or routine). 4) Search (passive, active or confirmatory). 5) Evaluation (how alternatives are assessed). 6) Choice rule (which heuristic decided). 7) Price (deciding factor, trade-off or secondary concern).

What is the decision sequence for low-involvement purchases?

Know → Do → (Feel).

What is the decision sequence for utilitarian (high-involvement) purchases?

Awareness → Interest → Desire → Action (AIDA).

What is the decision sequence for hedonic/ego-expressive purchases?

Feel → Do → (Know).

What triggers each type of purchase?

Low involvement: stock depletion (running out). Utilitarian: a gap between current state and desired state. Hedonic/ego-expressive: impulse, need or desire.

What type of search occurs in each motivational context?

Low involvement: passive search. Utilitarian: active search. Hedonic/ego-expressive: confirmatory search.

How are alternatives evaluated in each motivational context?

Low involvement: limited or no evaluation/comparison of alternatives. Utilitarian: rational use of information and rational trade-off among alternatives. Hedonic: rationalizing evaluation (justifying an existing preference).

What is the choice heuristic in each motivational context?

Low involvement: buy the familiar or buy the cheapest. Utilitarian: buy the best. Hedonic/ego-expressive: buy what I love.

What is the ultimate choice model in each motivational context?

Low involvement: satisficing model. Utilitarian: trade-off among competing alternatives. Hedonic/ego-expressive: satisficing model.

What role does price play in each motivational context?

Low involvement: price is the deciding factor. Utilitarian: price is a trade-off variable. Hedonic/ego-expressive: price is a secondary concern.

What type of problem solving characterizes utilitarian purchases?

Extensive problem solving, which can become a routine response over time. Low-involvement purchases involve routine or limited problem solving.

What is the rational use of information in low-involvement decisions?

The slides list "rational use of information" for low involvement too, but with passive search and limited or no evaluation of alternatives (Know → Do).

What are the marketing implications and threats for low-involvement products?

Key: saliency of the brand and making sure the product is available. Threat: interruptions in the purchase cycle.

What are the marketing implications and threats for utilitarian products?

Key: product performance and providing information. Threat: better-performing alternatives.

What are the marketing implications and threats for hedonic/ego-expressive products?

Key: clear, relevant articulation of brand image. Threat: a change in the consumer's self-image or in the brand image.

What is the core implication of the three motivational contexts?

Involvement changes how consumers search, evaluate alternatives, choose, and interpret price. Decision behavior shifts from habitual choice (low involvement) to rational trade-offs (utilitarian) to emotional validation (hedonic).

What do interviews reveal about consumer behavior (strengths)?

Consumers' language, motives and personal interpretations; the sequence and context of a decision; unexpected themes that structured surveys may miss; rich explanations of emotional and symbolic consumption.

Where can interviews mislead (weaknesses)?

Interviewer bias (wording and reactions influence answers). Social desirability (people describe acceptable behavior). Limited introspection (consumers may not know their motives). Recall and rationalization (explanations are reconstructed). Non-independence (earlier questions shape later answers).

How should interviews be used in consumer research?

To understand meaning and generate hypotheses, not as standalone proof of actual behavior.

What are the key learning outcomes of Session 3?

1) The motivational model that best describes a consumer's behavior depends on the consumer and their interpretation of the product, NOT the product's objective characteristics. 2) Consumers are often not rational. 3) There are many research methods; interviews can be difficult and prone to biases.

Can the same product fall into different motivational contexts?

Yes. The model depends on the consumer's interpretation of the product, not its objective features (e.g., a watch can be utilitarian for one person and ego-expressive for another).

What are the five stages of the traditional consumer decision-making model?

1) Problem recognition. 2) Information search. 3) Evaluation of alternatives. 4) Purchase decision. 5) Post-purchase evaluation.

What four categories of influences affect the traditional decision-making model?

1) Marketing mix influences (price, promotion, place, product). 2) Sociocultural influences (reference groups, culture). 3) Situational influences (physical and social surroundings). 4) Psychological influences (motivation, values, personality).

What is problem recognition?

Perceiving a need: the consumer perceives a discrepancy between the "GOT" (current situation) and the "WANT" (desired situation).

What three conditions must hold for problem recognition to occur?

1) The consumer perceives a difference between the ideal and actual situations. 2) The difference is big enough to trigger a decision. 3) The desired state is attainable.

What are the two sources of problem recognition?

Self-generated, or prompted by marketing stimuli (e.g., an IKEA ad).

What two questions does information search answer?

1) What are the criteria to evaluate a product (e.g., the attributes)? 2) What are the options (e.g., a list of brands)?

What is internal search?

Searching memory for relevant information, feelings and past experiences; deliberate retrieval of information from memory.

What are the four types of external information sources?

Personal (family, friends, neighbors). Commercial (advertising, salespeople, online). Public (e.g., Consumer Reports). Experiential (handling, examining and using the product).

Which external information source is most influential and which is most frequent?

Personal sources (family, friends, neighbors) are the most influential. Commercial sources (advertising, salespeople, online) are the most frequent.

What factors determine how much effort consumers put into information search?

Consumer involvement; marketing environment (distribution of shops, availability and access to information); number of products in the category; costs and benefits of search; situational variables (time constraints, crowded environment); individual differences (age, education, prior knowledge, experience).

How does product knowledge relate to search effort (Kardes motivation-ability graph)?

As product knowledge increases, motivation to search decreases while ability to search increases. Search effort is highest at moderate knowledge, forming an inverted U. Novices lack ability; experts lack motivation.

What happens in the evaluation of alternatives stage?

1) Evaluation criteria are formed (which attributes to use). 2) A shortlist of alternatives is formed (the evoked or consideration set).

What is a consideration set (evoked set)?

The shortlist of alternatives a consumer seriously considers when making a choice.

What were the attributes and alternatives in the kitesurf trip example?

Attributes: wind reliability, fun/nightlife, travel time, price. Alternatives: Fuerteventura (Canary Islands), Dakhla (Morocco), Tarifa (Spain), Hurghada (Egypt).

What is the lexicographic rule?

Identify the most important feature and pick the product that is best on it. If there is a tie, move to the next most important feature.

What is the satisficing rule?

Set a "good enough" value for all features. Consider products one at a time and pick the first product that meets or exceeds "good enough" on every feature.

What is elimination by aspects (EBA)?

Rank features by importance and set a minimum acceptable value (cutoff) for each. Go feature by feature, most important first, eliminating options below the cutoff, until one "survivor" remains.

What does "non-compensatory" mean?

A decision rule in which consumers do not make trade-offs: a strong score on one attribute cannot make up for a weak score on another. Lexicographic, satisficing and elimination by aspects are non-compensatory.

What are the characteristics of non-compensatory rules?

They are simple rules of thumb (heuristics) that need less thought and less information, but can be error-prone (biased). They are often used as a first step to reduce the consideration set, sometimes followed by compensatory trade-offs among fewer options.

What is a compensatory decision model?

A model in which a weakness on one attribute can be compensated by strength on another; the consumer weighs all attributes to form an overall evaluation. Used to choose from the consideration set (e.g., Fishbein's multi-attribute model).

What is the formula for Fishbein's multi-attribute model?

Attitude_k = Σ b_ik × e_i, where k = your product/brand, b_ik = the perception (belief) that brand k possesses attribute i, and e_i = the importance (or evaluation) of attribute i.

What is the technical note about e_i in Fishbein's model?

In Fishbein's original model, e_i is the evaluation of attribute i (how good or bad it is to have it), not its importance. Many marketing texts, and the kitesurf example, use importance weights instead; strictly speaking that is an importance-weighted additive model.

Which destination wins under the lexicographic rule in the kitesurf example, and why?

Dakhla. Wind reliability is the most important attribute, and Dakhla scores highest on wind (9).

What is the key lesson of applying the different rules to the kitesurf data?

Same data, different rules, different choices. Dakhla only wins if travelers decide on wind alone, so its marketing should make wind the deciding criterion.

When do consumers tend to use compensatory rules?

Lots of time, few attributes, few options, important decision, attributes easy to trade off and compare, information presented sequentially, need to give reasons.

When do consumers tend to use non-compensatory rules?

Little time, many attributes, many options, low-stakes decision, attributes hard to trade off and compare, information presented simultaneously, no need to give reasons.

What is the purchase decision stage?

Choosing which alternative from the consideration set to buy, often using compensatory models such as Fishbein's multi-attribute model.

What is post-purchase evaluation?

How much value consumers experience when using the product. It feeds back into the other stages for future purchases, is a function of expectations and experience, and is shaped by post-purchase communications (ads, follow-up surveys, etc.).

Why are the stages of the decision-making model useful?

Marketing actions differ depending on the stage where the problem lies; information processing differs across stages (e.g., consideration set vs. final choice); and it helps analyze the impact of marketing actions, e.g., how changes in attribute scores and weights affect overall attitude.

What is the circular consumer decision journey?

An alternative framework (McKinsey) with four phases: 1) initial consideration, 2) active evaluation (researching), 3) closure / moment of purchase, 4) post-purchase experience. A trigger starts the journey and a loyalty loop can bring consumers straight back to purchase.

Describe each phase of the circular decision journey.

1) The consumer considers an initial set of brands based on brand perceptions and recent touch points. 2) Active evaluation: consumers add or subtract brands as they gather information and shop. 3) The consumer selects a brand at the moment of purchase. 4) After purchase, experience builds expectations that inform the next journey (ongoing exposure).

What is the loyalty loop?

In the circular journey, a satisfied consumer skips the initial consideration and active evaluation phases and goes straight back to buying the same brand.

How does the circular journey differ from the traditional linear model?

It is circular, not a one-way funnel: brands can be added or dropped during evaluation, the post-purchase experience shapes the next journey, and loyal consumers can loop straight back to purchase.

How do people really make decisions, compared to the traditional model?

Many decisions don't follow the traditional five-stage path. Consumers often use heuristics instead.

What is a heuristic?

A simple cognitive strategy ("rule of thumb") that ignores some information about attributes or options. It needs less thought and information, is often used first to reduce the consideration set, can lead to biased or suboptimal decisions, but can also "work."

What is an example of the elimination by aspects heuristic online?

Using filters on booking.com (e.g., price range, star rating) to eliminate options that don't meet cutoffs.

What is the attraction (decoy) effect?

A brand or product becomes more attractive when it is compared to a slightly inferior option (the decoy).

How does the decoy effect work graphically?

Brands A and B are equally preferred on two dimensions. Adding decoy C, which is similar to but slightly worse than B, increases preference for B.

What popcorn example illustrates the decoy effect?

Small popcorn $3 and large $7. Adding a medium size priced close to the large (e.g., $6.50) acts as a decoy and makes the large look like better value.

What is the compromise effect?

An option appears more attractive when it is seen as a good compromise or "middle" option between alternatives.

How does the compromise effect work graphically?

Brands A and B are equally preferred. Adding Brand C, which is excellent on dimension B but poor on dimension A, makes B the middle option and increases preference for B.

What is the difference between the attraction effect and the compromise effect?

Attraction: the added option is similar to but dominated by (slightly worse than) the target. Compromise: the added option is extreme, making the target the middle option.

What is the availability heuristic?

We judge how likely an event is by how easily examples come to mind. "If it's easy to retrieve from memory, it must be likely."

What is the shark vs. falling airplane parts example?

People think shark attacks are more likely because they are vivid and widely reported, but a person is 30 times more likely to die from falling airplane parts than from a shark attack. This illustrates the availability heuristic.

How does the availability heuristic explain flood insurance purchases?

Flooding reported in the media becomes more salient and easier to retrieve from memory, so consumers predict a higher likelihood of flooding and are more likely to buy insurance.

What heuristic does the Linda problem illustrate, and what error is made?

The representativeness heuristic. People choose B because Linda resembles a feminist, ignoring the rule that a combination of two conditions can never be more likely than one condition alone (the conjunction fallacy).

What is the representativeness heuristic?

Making predictions based on the perceived similarity between a specific target and a general category.

What are marketing examples of the representativeness heuristic?

Unknown brands design products with similar style or characteristics to leading brands (copycat packaging). If a consumer believes MacBooks are high quality, they may conclude Apple's EarPods are also high quality.

What is the anchoring and adjustment heuristic?

Consumers anchor on a first impression or initial number and adjust up or down from it, but usually not enough, so the final judgment stays close to the anchor.

Describe the social security number auction experiment.

People were asked whether they would pay, in dollars, the last two digits of their social security number for products (e.g., wine, chocolate), e.g., digits 67 → "would you pay $67?" Then they stated their willingness to pay. Those with higher numbers were willing to pay more, showing anchoring on an arbitrary number.

Who developed prospect theory, and what recognition did it receive?

Daniel Kahneman and Amos Tversky. Kahneman won the Nobel Prize in Economics in 2002 for integrating insights from psychology into economics, especially about judgment and decision-making under uncertainty. His book is "Thinking, Fast and Slow."

What are the three key principles of prospect theory?

1) Changes are evaluated relative to a reference point (which can change). 2) Diminishing sensitivity: the marginal effect on value gets smaller as the amount of gain or loss increases. 3) Loss aversion: losses feel larger than gains of the same size.

Describe the shape of the prospect theory value function.

An S-shaped curve through the reference point: concave for gains (flattening as gains grow), convex for losses, and steeper for losses than for gains.

What does "segregate gains, aggregate losses" mean?

Because of diminishing sensitivity, many small gains feel better than one large gain, so gains should be presented separately. Losses feel less painful when combined into one, so they should be bundled (e.g., price bundling).

What does prospect theory imply about price increases vs. quantity decreases?

Consumers notice and dislike explicit price increases (a loss) more than reductions in quantity at the same price, so companies often shrink package size instead of raising prices.

What is loss aversion?

The tendency for losses to feel larger than equivalent gains.

What is the endowment effect?

A consequence of loss aversion: people value something more once they own it, because giving it up feels like a loss.

What is the status quo bias?

People tend to stick with the current state of affairs (the default), partly because changing feels like a potential loss.

What are examples of the power of defaults?

Pre-ticked checkboxes on websites (e.g., "I want to receive your monthly newsletter") and organ donation rates in countries with default enrollment (opt-out) vs. explicit consent (opt-in).